Unconventional Wisdom

NY Post:

There’s nothing inherently wrong with one company earning a large market share, but the lack of significant competition helps contribute to higher insurance costs and poorer service. Moreover, this market concentration hasn’t necessarily flowed from consumer preference in a free market, but results in good part from barriers to entry erected by state insurance regulation.

Obama’s answer to this problem is to set up a new government-run insurance plan to compete with private insurers. But such a plan will ultimately result in less competition, not more.

A government-run plan would have an inherent advantage in the marketplace, because it ultimately would be subsidized by taxpayers. The government plan could keep its premiums artificially low or offer extra benefits, because it could turn to taxpayers to cover any shortfalls.

Plus, the government plan also could use its market power to impose much lower reimbursement rates on doctors and hospitals — Medicare and Medicaid do that now, to the point where they often pay less than cost. Providers would be forced to recoup the income lost thanks to the “public option” by raising what they charge to private insurance — driving up premiums and making private insurance even less competitive.

Real Clear Politics:

People who didn’t vote for Barack Obama will hoot how obvious it was to them, and should have been to their Obama-ga-ga friends, that he was always a stalking horse for a steroidal government. Maybe so, but there’s a lot of political complexity in 129 million votes.

For many voters, he appeared to be the Most Reasonable Man in politics. Obama enveloped and absorbed them. He could articulate an opponent’s point of view better than they could themselves. He knew, and that made people think their beliefs would always have a seat at his table.

He was moralistic, too. He made his agenda sound like a moral imperative. This worked. People here are attracted to a moral argument. The Rev. Wright mess could have been fatal. That he floated away from it with a grand moral speech on race in America bespoke a kind of unique personal magic. People thought they hadn’t seen anyone like Barack Obama stand for high office in a long time, so they voted for him.

But some are falling off the train. The president’s approval rating has dropped close to 50% from just over 60%. It’s early in a presidency to be dropping fast toward 50. Part of this is health care, but something else is going on here.

Big as the health-care proposal is, the White House might have gotten it easily as a standalone piece of legislation, given the congressional majorities and Obama’s reservoir of goodwill. But health care arrived in late May as a trillion-pound federal elephant in an Obama house that was looking like a Noah’s ark of every known species of federal spending: the $800 billion public-works stimulus, the deficit-busting $3.5 trillion budget (and now Treasury’s Tim Geithner wants Congress to lift the debt limit above $12.1 trillion), the grandiose cap-and-trade bill that foundered when Democratic coal states rebelled, the U.S. engulfment of the auto industry, the tax time bombs.

NY Times:

A vast majority of the nation’s small employers — those who have 25 or fewer workers in the Senate health bill or annual payrolls of $500,000 or less in the House version — would likely be exempted from the mandate.

An analysis by Jonathan Gruber, a respected health economist at the Massachusetts Institute of Technology, concluded that those small businesses that are not exempt would see little impact on employment or profits, although employers would reduce wages to compensate for providing added benefits. The nonpartisan Congressional Budget Office, the chief arbiter of the impact of legislation, has come to similar conclusions.

What’s been most lost in the furor is how much most small businesses would benefit from provisions that should make insurance more affordable — for businesses that already provide coverage and for those that have been deterred from providing coverage by cost.

Small businesses that currently offer coverage often pay significantly more per worker than larger employers do for the same coverage. Under all of the current bills, the smallest employers would gain quick access to new insurance exchanges — where plans would compete for their business with rates comparable to those enjoyed by large employers. (In subsequent years, slightly bigger firms and possibly even medium-size firms would likely gain access to the exchanges as well.)

And many small businesses with low-wage workers would be eligible for substantial tax credits to subsidize their coverage.

Real Clear Markets:

Monetary policy is hardly a science, so a good central banker must be humble. He must appreciate the limits of his understanding and of the efficacy of the tools at his disposal. Yet he cannot afford to be perceived as indecisive, which would only invite destabilising financial speculation.

Indeed, as important as their functions are, in recent decades central banks have become even more significant as a consequence of the development of financial markets. Even when not formally designated as such, central banks have become the guardians of financial-market sanity. The dangers of failing at this task have been made painfully clear in the sub-prime mortgage debacle. Under Obama’s proposed new rules, the Fed will have even larger responsibilities, and will be charged with averting financial crises and ensuring that banks are not taking on too much risk.

This is a job at which former Fed Chairman Alan Greenspan proved to be a spectacular failure. His blind spot on financial-market excesses – the little “flaw” in his thinking, as he later termed – left him oblivious to the dangers of Wall Street titans’ financial innovations. As a member of the Fed’s Board of Governors under Greenspan during 2002-2005, Bernanke can also be faulted for having played along.

The Fed chairman exerts global influence not only through monetary policy, but also through his words. He sets the tone for policy discussions and helps shape the belief system within which policymakers around the world operate.

What hampered Greenspan and Bernanke as financial regulators was that they were excessively in awe of Wall Street and what it does. They operated under the assumption that what is good for Wall Street is good for Main Street. This will no doubt change as a result of the crisis, even if Bernanke remains at the helm. But what the world needs is a Fed chairman who is instinctively sceptical of financial markets and their social value.

Real Clear Markets:

For decades now, would-be health care reformers have claimed that if we just invest more in preventive care we will cut big chunks of spending out of our health system. In the early 1990s, for instance, Medicaid administrators and hospital executives argued that if we built more satellite health clinics in poorer neighborhoods, residents would get check-ups more often and visit hospital emergency rooms, where care is expensive, less frequently. So hospitals built the clinics, often with government grants, and we got more clinics but just as many emergency room visits, and Medicaid costs continued to spiral upwards.

Still, politicians have remained undeterred. In the 2008 presidential election, John Edwards told us that “study after study shows that primary and preventive care greatly reduces future health care costs,” while Barack Obama claimed that “too little is spent on prevention and public health.” Recently, President Obama claimed at a town hall meeting that by adding preventive care to health reform we’ll cut down on costs, including costs for emergency room visits.

But I would be skeptical of any health reform legislation that projects big savings from preventive care or, even worse, requires new government programs to boost preventive care. As a report issued by the Congressional Budget Office last week reminded us, there are no widespread savings to be expected from increased preventive care. In fact, the report concluded, most preventive care actually adds to health care spending. What a shocker to learn that spending more money actually costs more.

Telegraph:

If Stephen Hawking had been treated in Britain, he would not have survived to be awarded his Presidential Medal of Freedom by Barack Obama yesterday, because the NHS “would say the life of this brilliant man, because of his physical handicaps, is essentially worthless”. That was the thundering verdict of the Investor’s Business Daily on our National Health Service and Mr Obama’s plans to introduce what Republicans term “socialised medicine”.

It was, as scientists sometimes say, a beautiful hypothesis destroyed by a single ugly fact. Professor Hawking, who is completely paralysed by motor neurone disease, has been treated by the NHS throughout his 67 years, and points out indignantly that he would not have lived without its care.

Much of the conservative contribution to the health care debate raging in the United States, which is dominating a long, hot summer, has been as misguided as that newspaper editorial. With the battle lines drawn, and President Obama staking his credibility on achieving a comprehensive reform that delivers health insurance to the tens of millions without it, Democratic members of Congress are facing the wrath and anxiety of their constituents – who are being urged on by opponents of reform.

Larry Kudlow:

It’s hard to know why President Obama said what he said at Tuesday’s health-care town hall in New Hampshire. He actually stated: “If you think about it, UPS and FedEx are doing just fine. It’s the Post Office that’s always having problems.”

Oops. Freudian slip? Subliminally speaking, was the president inferring that private health insurers are doing just fine?

Government insurance is what’s in trouble today. Medicare is in the hole by about $40 trillion on a discounted present-value basis over the next 40 or 50 years. And if we’re going to equate government care to government mail, according to Steve Hayes of The Weekly Standard, the U.S. Postal Service is going bankrupt with a $7 billion net loss this year. With 633,000 career employees, the Post Office won’t be able to make $5.4 billion in retiree health-benefit payments. How many of these federal employees will populate the new government-backed insurance plan if it passes?

So it’s something of a mystery why the president went down the FedEx/UPS/Post Office turnpike. Perhaps the inner Obama is a free-enterprise guy. Maybe in the heat of battle, his private-sector FedEx/UPS endorsement kind of, well, slipped out unconsciously.